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Going International for the First Time.

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Presentation on theme: "Going International for the First Time."— Presentation transcript:

1 Going International for the First Time

2 • When to consider international expansion
• Checklist prior to launching your international program • Potential ways to enter foreign markets • Identifying which countries might be right for your brand • Identifying and qualifying international candidates • Costly mistakes to avoid

3 When Should you Consider
International Expansion? • Being opportunistic versus realistic • Franchising “what you know” • Integrate international development into your business planning process • Ensure your domestic and international strategies complement rather than compete with each other 3

4 Questions to Ask Before Committing to an International Development Strategy? • Do we understand the commitment that is required in terms of time, resources and people? • Is our product or concept well suited to international markets? • Does our management team have any experience outside our home country?

5 International Development Strategies
• A variety of options are available for international expansion, including; – Direct entry via company-owned operations – Joint-venture relationship – Direct Single-unit franchising – Area development franchising – Master franchising

6 International Development Strategies
• Joint-Venture Development – High risk, moderate reward strategy – Can be used to avoid foreign ownership restrictions or to “acquire” local knowledge within the ownership group – Partner roles must be clearly defined – Many joint-ventures fail – Dissolving the relationship is often difficult

7 International Development Strategies
• Direct Single Unit Franchising – High degree of control – Difficult to recoup initial development costs related to entering the country – Challenge of managing many relationships from a distance – Challenge of implementing a cohesive brand Strategy across different markets – More difficult to negotiate in-country supplier agreements

8 International Development Strategies
• Area Development Franchising; – Allows greater direct control over unit-level quality – Can create a level of “healthy competition” – Fewer relationships to manage than single-unit franchising – Ability to segment ownership groups by markets or regions within the local country

9 International Development Strategies
• Master Franchising – Most common form of international development – Often over-used – Ideal for countries having larger populations or core markets which are geographically distant – Success is reliant on selecting the right master franchisee – Master franchisee should also operate locations – Sub-franchisees could be area developers or single unit franchises

10 Identifying Countries for Expansion
• Have you received requests from abroad? • What market criteria matter for your brand entry? • How do you determine the “ripe” markets, what is the prioritization and at what rate do you plan to grow? • Do your competencies match the target countries selection?

11 Identifying International Candidates
• Potential International Franchisee Candidate Groups – – Successful companies and groups particularly from these sectors • Multi-Unit developers of other non-competing franchise systems

12 Considerations For Initiating An International Expansion Effort

13 Discussion Topics • Why International? • When Is The Right Time To Expand • Organizational Readiness • Developing The Expansion Plan

14 Global business & franchise map
Number of businesses / franchise systems USA 15 million / 3700 UK 3 million / 750 Australia 1 million / 1200 China > 20 million? / 2000 India > 25 million? / 1000 Considerations 􀂃 Business know-how is valuable 􀂃 Capitalization strategy 􀂃 Economic opportunity for all 􀂃 Driver of employment 􀂃 Development of people 􀂃 National & international growth

15 GOING GLOBAL BUILDING A SERIOUS INTERNATIONAL BUSINESS KEY REASONS FOR FAILURE
Expanding an immature business Inappropriate business model Irrational country selection Ignoring market nuance Inadequate capital base Insufficient senior resource Inadequate start-up strategy

16 Going Global Building a Serious International Business
Factor Immature Expansion ready Cash flow Weak position Strong cash-flow Capital Under-capitalized Capital readily available Systems and processes Under development Locked down Human resources Stretched Senior resources available Domestic growth Substantial remaining Exhausted

17 ORGANIZATIONAL READINESS
• Mindset needed to truly plan a global expansion (CEO to Reception) • Education, preparation and planning paramount to your success…do not underestimate the amount of time this takes • Understanding negotiations in different cultures • Profitable domestic operations • Strong franchisee validation

18 Identifying International Market Opportunities

19 What Does Your Franchise Need To Succeed
In the Diverse Global Franchise Market? • A business plan that focuses on the right markets for your particular franchise • An assessment of the potential of these markets to produce a good Rate Of Return for your franchise • Clear differentiation from similar businesses • Documented training, support and marketing programs for your international licensee

20 Factors To Consider When
Deciding Which Countries To Enter • Rule of Law • Country Stability • Government Involvement • Intellectual Property Protection • Can you easily get your fees out? • Does the customer base fit your franchise • Potential To Achieve An Acceptable ROI

21 Strong International Franchise Sectors For 2010
• Automotive – After market products and services • Children’s Education – At all levels • Commercial Services - Facility management, Cleaning, Handyman, Security • Personal Services – Handyman, Maid, Mobile • Retail – To fill large malls in emerging markets • Specialty Food – Mall anchor concepts, special brands, ethnic foods, well known pizza brands

22 Strong International Franchise Markets For 2010/2011
• The United States • Brazil – Strong growth, high level of franchising • China – Focused on 1st and 2nd Tier Cities • India – Strong desire for food and retail brands • Expected Growth Markets For Franchising in 2011 • South Africa, Turkey, and Vietnam • EU & Central Europe

23 Budgeting and Planning for International Franchising

24 When should a company begin planning for international expansion?
24

25 WHEN A COMPANY HAS A CERTAIN • LOCATION(S) • PROFITABILITY • NUMBER OF UNITS • SIZE OF HOME MARKET • GOOD PROSPECTS ARE AVAILABLE

26 WHAT SHOULD AN INTERNATIONAL FRANCHISE EXPANSION PLAN INCLUDE?

27 – specific countries? – regions? – markets near existing operations? – well qualified franchise candidates? – markets where products offered by the franchise are most popular?

28 Important Consideration: What portion of the marginal expense of entering a new foreign market should a franchisor expect to recoup from initial franchise fees?

29 How long should a franchisor expect to wait before breaking even on its investment in a new foreign market?

30 international expansion franchisors
Elements of an international expansion franchisors sometimes overlook or undervalue

31 – market research to evaluate viability • preliminary • at execution stage – franchising strategy • master • area development • joint venture • unit – resources needed • operational • financial • human

32 What resources are available to help franchisors plan for
International expansion?

33 Budgeting and Planning Resources and Market Information • IFA - www
Budgeting and Planning Resources and Market Information • IFA • US Commercial Services • CIA World Fact Book • Economist country briefings • American Chambers of Commerce • Local franchise and trade associations • Prospective franchisees • International banks • Multinational suppliers • Law and accounting firms • International Council of Shopping Centers • Consultants

34 What roles could international franchise consultants play in helping to develop and implement international expansion plans?

35 What process will you use to prepare a long range international budget in the following areas: – trademarks/legal – procedure manuals – translations – operational support – supply chain – equipment and furnishings

36 Sources cited for this presentation IFA 50th annual convention, Feb
Sources cited for this presentation IFA 50th annual convention, Feb Ned Lyerly, SVP - CKE Restaurants Kay Ainsley, MD - Michal H Seid Assoc. Kevin Derella, SVP – Coverall Health Based Sys. John Drig, President – Instant Imprints Carl Zwisler, Attny., - Gray Plant Mooty Rose Nichols Zimake, Int’l Deve., - Dairy Queen William Le Sate, CEO – Le Sate Int’l. Lee Vala, President, - Vala Interactive William Edwards, CEO – EGS, LLC Charlie Weeks, VP – Outback Steakhouse Rod Young, Executive Director, DC Strategies Jason Zickerman, CEO – The Alternative Board

37 Thank you


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